Market Close: Weak Reports from Visa, Amazon Hurt Stocks

Apple laptop computer screen showing internet Amazon.com page plus hand with credit card
B. O'Kane/Alamy
Investors got some bad news about the American shopper on Friday, driving down stocks and sending the Dow Jones industrial average to a loss for the week.

Two major U.S. companies -- the retail giant Amazon (AMZN) and the credit card processor Visa (V) -- both said that the second half of the year was looking more troubled than originally expected. The cautious outlook from two companies so heavily exposed to consumer spending spooked investors, causing the stock market to fall at the open and remain lower throughout the day.

"Visa put a lot of caution into the market this morning," said Quincy Krosby, a market strategist at Prudential Financial.


The Dow Jones industrial average (^DJI) dropped 123.23 points, or 0.7 percent, to 16,960.57. It's the first time the Dow has closed below the psychologically notable 17,000-point mark since July 9.

The Standard & Poor's 500 (^GPSC) fell 9.64 points, or 0.5 percent, to 1,978.34 and the Nasdaq composite (^IXIC) fell 22.54 points, or 0.5 percent, to 4,449.56.

With Friday's selling, the Dow fell 0.8 percent this week. The S&P 500 closed basically unchanged and the Nasdaq rose 0.4 percent this week.

Visa was the biggest decliner among the blue chips, falling $7.97, or 3.6 percent, to $214.77. The credit card processor reported an 11 percent rise in quarterly profit but cut its full-year forecast on concerns about growth overseas.

Because the Dow is a price-weighted index, and Visa is the most expensive stock in the Dow, Visa was having an outsized impact on it. Roughly 60 points of the Dow's decline can be attributed to Visa.

Investors have closely watched Visa ever since the company went public in 2008. Credit cards that use Visa's payment system are in nearly person's pocket, and each time a consumer buys a product with a Visa card the company takes a small percentage.

To see Visa give a cautious outlook is worrisome, Krosby said.

"Visa represents the consumer and the consumer is one of the most important pieces for the future of this economic recovery," she said.

Amazon's quarterly results didn't help boost investor sentiment either.

Amazon's stock slumped 10 percent after the online retail giant late Thursday posted a much wider loss than analysts had forecast, hit by expenses. The Seattle-based company is focused on spending the money it makes to expand into new areas and products, including a smartphone, the Fire, which starts selling Friday.

Amazon fell $36.60 to close at $324.01, the biggest decliner in the S&P 500 index.

Investors retreated from riskier stocks and moved into traditional havens at times of uncertainty: bonds and gold. The yield on the 10-year Treasury note eased to 2.47 percent from 2.50 percent late Thursday as demand for the government bond rose. Gold climbed $12.50, or 1 percent, to $1,303.30 an ounce

Despite the disappointing news from those consumer-focused companies, corporate earnings from the latest quarter have been solid. Of the 230 companies that have reported so far, 76 percent have beaten profit expectations and 67 percent have beaten sales expectations, according to FactSet. So far the S&P 500 is averaging a 6.7 percent earnings growth this quarter compared to a year ago. Investors had expected earnings to be up 4.9 percent when the results started to roll in at the beginning of July.

Even with Friday's declines, the stock market remains near all-time highs, and the S&P 500 closed at a record Thursday. That made some investors cautious.

"I continue to see the level of complacency in the [stock] market to be unnerving," Scott Clemons, chief investment strategist at Brown Brothers Harriman, which manages $25 billion in assets for private investors. "All of this geopolitical tension, the market trading near all-time highs, I think the market is at a critical state right now."

Clemons said he doesn't believe the market is poised for a major sell-off, but instead thinks investors should brace for more volatility and more heavy-handed reaction to disappointing earnings or data, like Friday's Amazon and Visa results.

In other company news:

• Starbucks (SBUX) fell $1.71, or 2 percent, to $78.74despite the company reporting a profit that came in above analysts' expectations. The company also raised its full-year profit forecast.

• El Pollo Loco surged $9.03, or 60 percent, to $24.03 on its first day of trading in the public market. The grilled chicken restaurant chain priced its shares at $15 per share late Thursday. .

What to watch Monday:
  • The National Association of Realtors releases its pending home sales index for June at 10 a.m. Eastern time.
  • The Federal Reserve Bank of Dallas releases its survey of manufacturing conditions in the region at 10:30 a.m. Eastern time.
These major companies are scheduled to release quarterly financial statements:
  • Cummins (CMI)
  • Eastman Chemical (EMN)
  • HealthSouth (HLS)
  • Herbalife (HLF)
  • Masco (MAS)
  • Norwegian Cruise Line Holdings (NCLH)
  • Tenneco (TEN)
  • Tyson Foods (TSN)

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13 Comments

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Iselin007

http://en.wikipedia.org/wiki/Rowley,_East_Riding_of_Yorkshire

I found many of the AOL partner Web Sites not functioning today. I couldn't post on the AOL feature story about the Congress member being blocked by Wikepedia.

Wikipedia.org recognizes my first great grandfather ( Thomas Wickham) and his brother Richard who came to the colonies back in June 1638 with Ezekiel Rodgers who founded Rowely Massachusetts and brought the first Printing press to America.

I think, I am owed an oppology. I wouldn't have to post my complaint here if the other site was working properly.

July 27 2014 at 5:40 PM Report abuse rate up rate down Reply
socioeconomist1

The markets were too high... The DOW will top out around 18,500ish before the next recession and that will be in 4 to 6 years... It wouldn't surprise me to see the DOW jump back and forth between 16,500 and 17,500 for the next two years before that final inflation of the bubble just before the pop.

July 26 2014 at 2:48 AM Report abuse rate up rate down Reply
1 reply to socioeconomist1's comment
Iselin007

Some analyst predict opposite outcomes. Reality is the hype maybe over blown and there could be another recession with the Dow going the otherway.

July 26 2014 at 11:31 AM Report abuse rate up rate down Reply
Iselin007

Looks like the infrastructure bill is a scam. The jobs are already held by the politically connected and their friends. Isn't any jobs being offered to the general public.

Saw State senators touting the bill but not saying how the general public could get the jobs.

July 25 2014 at 8:25 PM Report abuse rate up rate down Reply
Iselin007

The Herbal Life report ought to be interesting since the company is being charged in the news with some nasty stuff. I wonder how the alleged charges will effect the report.

July 25 2014 at 8:14 PM Report abuse rate up rate down Reply
Iselin007

The VISA company isn't the worry. The Visa workers that are stealing American jobs are the blame.

July 25 2014 at 7:54 PM Report abuse rate up rate down Reply
Karl

OMG, the DOW dropped .07 points. Sell the house. sell the children. The world is going to end.

July 25 2014 at 7:51 PM Report abuse -2 rate up rate down Reply
1 reply to Karl's comment
Iselin007

A dip is in the tea leaves.

July 25 2014 at 8:15 PM Report abuse rate up rate down Reply
kolblh

The best customer of American industry is the well paid worker. --- FDR

July 25 2014 at 7:28 PM Report abuse +1 rate up rate down Reply
1 reply to kolblh's comment
Iselin007

Tell that to the 9.5 million unemployed and the over 92.1 million not in the labor force age 16 and over of which another 6.1 million want to work if they could get a job.

The total that want jobs is (combined) some 15.6 millon. It's not the Visa card it's the Visa program stealing American jobs

July 25 2014 at 8:05 PM Report abuse -1 rate up rate down Reply
Charlie Jackson

Fresh-----and----Great News.

The US will start imposing tariffs on Taiwan and Chinese Solar Panels on the grounds of "Anti-Dumping Clause".

July 25 2014 at 5:36 PM Report abuse rate up rate down Reply
1 reply to Charlie Jackson's comment
Iselin007

Now if they could get rid of the visa workers and the one's they smuggled into the USA maybe the participation rate wouldn't be 62.8%

July 25 2014 at 7:59 PM Report abuse -1 rate up rate down Reply
Charlie Jackson

It means consumers are less dependent or want use less credit cards and want to spend less and save more

July 25 2014 at 5:29 PM Report abuse +1 rate up rate down Reply